TMI Blog1943 (9) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... ee is a limited cement Company which was assessed in the financial year 1939-40 for the previous year 1938 on an income of ₹ 2,94,225. This figure was arrived at by including a sum of ₹ 2,92,500 on account of profits made by the assessee as a result of sale of some shares. These were purchased by the assessee on the 31st October 1937 from the Rohtas Industries Ltd., Dalmianagar, a sister concern and one of the Dalmia group of companies which was working in co-operation with the assessee for marketing cement. The assessee is a newly floated company and its prospectus shows that it was to have factories at Karachi, Dandot and Dalmia Puram. But the factories at Karachi and Dalmia Puram were still under construction at the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 37 which authorised the Managing Agents to invest up to ₹ 4 lacs and that the profits made on the sale of those shares in question were nothing more than an appreciation of capital and are not liable to be taxed. The contention of the Income-tax Department on the other hand is that the assessee bought and sold the shares in pursuance of the objects mentioned in the Memorandum of Association referred to above and in course of doing business. It is on these facts that the question has been framed and submitted to us for an answer. This question has been considered in a number of English cases which I propose to notice. Northern Assurance Co. v. Russell [1889] 2 Tax Cas. 551: An Assurance Company was held liable to pay tax on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents in the case satisfy me that the sale on which the advantage was gained, in respect of which income- tax is said to be payable, was a proper trading transaction, one within the Company's power under their Articles, and contemplated as well as authorised by their Articles. The principle thus enunciated in this case has been approved both in the House of Lords and by their Lordships of the Judicial Committee; see latest case of Punjab Co- operative Bank Ltd. v. Commissioner of Income-tax, Punjab [1940] 8 I.T.R. 635, to be again considered below. The Commissioners of Inland Revenue v. The South Behar Railway Company Ltd. [1925] 12 Tax Cas. 657 : I am reading from the speech of Lord Dunedin at page 709: It is admitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... maining three were sunk during the war. The proceeds of sale and the insurance moneys received were all placed on deposit or invested on easily realisable investments in order to facilitate the resumption of trading or winding up. It was held on the authority of South Behar Railway Company's case [1925] 12 Tax Cas. 657 that the Company was carrying on a trade or business. The Attorney-General relied upon clause (d) of the objects for which the Company was formed. Sir William Finlay who appeared for the Company said that he could not distinguish the case from the case of the South Behar Railway Company. Rowlatt, J., came to the conclusion that the Company was taxable not by consent of Counsel but upon the authorities referred to in the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the Directors' Report the Rohtas Industries Ltd., has been described as a sister concern which was working in co-operation with the assessee company for marketing cement, evidently in competition with the Associated Cement Co., Ltd. At one time, I must confess, I was in considerable doubts whether it could not be held that the assessee company was merely realising its investments and therefore could not be said to have made any profit in the course of trade or business; but having read the authorities which I have noticed above and in particular the cases quoted in Dale Steamship Company Ltd., I am satisfied that the view taken by the Appellate Tribunal is correct. But Mr. P.R. Das relied very strongly upon the case of Pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... securities of the bank are realised in order to meet the withdrawals by depositors, it seems to their Lordships to be quite clear that this is a normal step in carrying on the business or, in other words that it is an act done in 'what is truly the carrying on' of the banking business. I cannot read this case as deciding that only in the case of a banking business the realisations of investments will result in taxable profits. In the present case, as shown above, what the assessee company did as to deal in shares and this was provided in the Articles of Association, and on the finding of fact that it invested the money in the shares of the sister company and thus promoted or advanced its own interest, I would be prepared to go fu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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